UK Stewardship Code
COBS 2.2.3R of the FCA’s Conduct of Business Sourcebook requires Promeritum Investment Management LLP (“Promeritum”, or the “Firm”) to disclose clearly on its website the nature of its commitment to the Financial Reporting Council’s Stewardship Code (the “Code”).
The Code is a voluntary code and sets out a number of principles relating to engagement by institutional investors (including both fund managers and asset owners) with UK equity issuers. Where a firm chooses not to commit to the Code, it must instead disclose its alternative investment strategy.
The seven principles of the Code are that institutional investors should, where applicable:
1. Publicly disclose their policy on how they will discharge their stewardship responsibilities;
2. Have and publicly disclose a robust policy on managing conflicts of interest in relation to stewardship;
3. Monitor their investee companies;
4. Establish clear guidelines on when and how they will escalate their activities;
5. Be willing to act collectively with other investors where appropriate;
6. Have a clear policy on voting and the disclosure of voting activity; and
7. Report periodically on their stewardship and voting activities.
Promeritum pursues a fixed income strategy with a focus on emerging markets. Since the Firm’s strategy does not generally involve investing in the shares of UK listed companies, the Code has a limited application to its investment activities.
Promeritum has a voting policy in place, which sets out the circumstances and manner in which the Firm will vote on behalf of clients. The Firm also has a conflicts of interest policy in place to identify the risk of any conflicts of interest arising with or between its clients and has in place procedures to deal with any conflicts that may arise. These policies and procedures are regularly reviewed and updated.
In the event there were concerns regarding governance which might affect the value of its investments, the Firm would consider the most appropriate course of action including exercising its voting power to oppose the board and/or disposing of its investment.
While the Firm generally supports the objectives that underlie the Code, the Firm does not consider it appropriate to commit to adhering to the Code at this time. If the Firm’s investment strategy changes such the provisions of the Code become relevant, the Firm will review and if necessary amend this disclosure accordingly.
Further to the implementation of the revised Shareholder Rights Directive ("SRD II") in the UK on 10 June 2019, Promeritum is also in the process of determining whether and to what extent to enhance its engagement procedures, as outlined above, and/or develop and disclose a more formal engagement policy to meet the requirements of Article 3g of SRD II. In addition, the Firm is aware that the FRC is currently consulting on changes to the Code which are expected to be finalised in late 2019. Promeritum will update this disclosure to address both SRD II and the revised Code once these have been finalised and published.